National Flood Insurance Program Set To Expire

National Flood Insurance Program Set To Expire

The National Flood Insurance Program (NFIP) is set to expire Friday night if Congress doesn't act, a lapse that could roil real estate markets and inject uncertainty into the lives of homeowners in flood-prone areas.

Lawmakers on Capitol Hill are eyeing a brief, two-week extension of the program to buy time for negotiations on a longer deal aimed at overhauling the critical but embattled federally run program.

The looming deadline to deal with the NFIP comes in the midst of a jam-packed and acrimonious stretch in Washington. Leaders on Capitol Hill are launching negotiations over a comprehensive spending bill also needed by Friday to avoid a shutdown of the federal government.

A proposed spending deal unveiled by Republican leaders on Monday would punt on both, keeping the flood insurance program and the government operating through Dec. 22, buying time for further negotiations over domestic and military spending as well as a range of other issues.

Many real estate professionals and advocates for NFIP policyholders had hoped for a longer agreement to offer greater certainty about flood-insurance coverage and rates. But given the looming deadline and frenzy of other activity on Capitol Hill, almost everyone involved now sees a short-term extension as the only realistic option to avoid the program's expiration.

A lapse in the program would create chaos in real estate markets and cause major issues for property owners looking to renew their policies, according to several Louisiana real estate agents who spoke with The Advocate in recent weeks. Banks couldn't sign off on new federally backed mortgages for homes in high-risk food areas and sales even outside those areas would likely slow dramatically or screech to a halt.

"True lapses in the program will literally shut down the markets in flood-prone regions," said Rick Haase, president of the New Orleans-based real estate company Latter & Blum. "Buyers don't want to buy in the unknown, sellers don't want to sell at prices based on the worst-case scenario and lenders don't want to lend."

"If there's a lapse in coverage, it would equate to about 1,300 losses of sales a day and 40,000 a month" nationally, said David McKey, co-owner of the Baton Rouge real estate company Coldwell Banker One and chair of the National Association of Realtors' insurance committee.

"Everybody knows we've got to keep it alive so we're going to do an extension," Sen. John Kennedy, R-Louisiana, said when asked about the prospect of a lapse in the NFIP.

Key factions in Congress have been at loggerheads for months over a raft of proposed changes to the National Flood Insurance Program, which is currently mired in billions of dollars of debt.

Politicians from flood-prone states, including Louisiana's delegation, have pressed for reforms that keep premiums affordable and don't restrict coverage for those in high-risk areas. But a group of fiscal hawks have sought to shore up the program's finances by significantly hiking premiums on those paying below-market rates and booting some properties out of the program altogether.

Another key sticking point is the role of the private market.

Federal regulations currently make it extremely difficult for private insurance companies to offer flood coverage and a number of Republican lawmakers have pushed changes to allow insurers to compete with the federal government. But Louisiana lawmakers and others have expressed concerns that private companies might "cherry pick" customers, luring the most profitable policyholders with lower prices while leaving the NFIP with an increasingly risky and subsidized group of homeowners.

Bridging the gap has proved difficult. The House of Representatives passed a five-year reauthorization to the program in November, a vote that split Louisiana's congressional delegation over concerns that changes in the bill would jack up rates on homeowners in large parts of flood-vulnerable Louisiana.

The Senate has shown no interest in taking up the House-passed bill but has also made little progress toward patching together its own comprehensive proposal from several competing bills, including separate ones sponsored by Kennedy and Sen. Bill Cassidy, R-Louisiana.

It's unclear how close a vote on the proposed spending deal might be or what price Democrats – at least eight needed in the Senate to pass it – might exact before getting on board.

Republicans in both chambers are also just beginning negotiations to hammer out differences between their tax plans, with Republicans hoping to send a final tax bill to President Donald Trump before Christmas.

"Right now, there's so much being jammed (through Congress) that it's been hard for everybody to sit back and consider the policy," Cassidy said Monday evening.

Cassidy added that a series of short-term extensions for the program are increasingly likely. Despite their drawbacks, Cassidy said, a series of short extensions with few or no changes would allow lawmakers time to keep pushing for a policyholder-friendly overhaul of the program.

"If we have to wait a little bit to get better policy, I'm OK with that," Cassidy said. "What we don't want is a piecemeal bill that would eliminate the ability to do important reforms."

"The shorter the better as far as I'm concerned," said Kennedy, "because I want to keep the pressure on to get something passed."

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